Hindsight is frequently 20/20 when discussing recent market movement and this morning's weakness is an example that's worth considering.  Heading into the second half of December, our advice was that none of the movement in bonds should be taken as indicative of the market's true intentions.  We also frequently noted inexplicable strength combined with low volume.  Now this morning, we're right back to levels that prevailed on the last few liquid/high-volume trading days of the first half of December.  Viewed in that light, one could argue that it's only logical, but was it?

At first glance, yes, one could argue it was logical.

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But here's the catch: all too often, we can observe that the present set of variables argues for a logical result, but that logical result doesn't reliably occur. In other words, logical outcomes don't necessarily increase predictability.  All we can say is that this outcome makes good sense in hindsight.  It also makes sense given the reality that additional improvement in bonds will require this week's economic data to come in weaker than expected.  With that data beginning tomorrow, and with the recent trend having been bullish, it's no big deal to see a bit of a pull back.

To be clear, we did have a few economic reports this morning, but the bigger ticket data starts tomorrow with JOLTS, ISM, and Fed Minutes.  The biggest data hits on Friday in the form of the jobs report.